All businesses, regardless of industry, face risks that should be covered by insurance. The most common and comprehensive type of policy business owners invest in is general liability insurance (or CGL).
Some of the risks CGL insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
While businesses aren’t legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A NANNY REFERRAL BUSINESS
Example 1: Your agency recommends a nanny to a family with a newborn baby. The nanny is hired, but one day she slips and falls while carrying the infant. In the event that the baby is seriously injured and your agency is found liable, you would likely be covered through general liability insurance for damages owed or settlements reached.
Example 2: A nanny you connect with a family is hired, and she admires a very expensive vintage typewriter in the client’s home office while the children are napping. She picks it up to move it to a room with better lighting and drops it on the floor. In the event that your company is found liable, general liability insurance could probably help to cover some of the damage you owe.
Example 3: A nanny is hired through your agency and does very well over the course of a couple of years. However, during her employment, she is found to have been filling the family’s car with a low-octane fuel that is not meant for that vehicle. Over time, this leads to badly damaged internal components in the car, requiring thousands of dollars of repairs. If found liable, your business would likely be covered by general liability insurance to assist with damages owed for the vehicle.
Of course, this is not an exhaustive list of perils a general liability insurance policy will cover, and some conditions may result in a particular peril not being covered. It’s always best to talk to your agent in-depth about the specifics of your policy to avoid blind spots in coverage.
The average nanny referral business in America spends between $300-$800 per year for $1 million in general liability coverage.
Check out the chart below for a snapshot of average CGL expenditure across a variety of industries:
Several factors will determine the price of your policy. These include your:
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all nanny referral businesses should obtain:
Professional Liability Insurance
For businesses that provide delicate or complex services with far-reaching consequences, a professional liability policy is a necessity. Nanny referral agencies may find themselves looking down the barrel of a lawsuit for negligent services or a failure to perform its promised function of providing a competent nanny. Keep your agency covered for events such as these, ensuring that you don’t suffer serious losses on account of a nanny you provide to client families.
Commercial Umbrella Insurance
For businesses that would like to go the extra mile and cover extra varieties of damages not addressed by standard policies, commercial umbrella insurance is the ticket. A nanny referral agency is up against a huge host of potentially costly situations. Children are of course precious to clients, who may decide to sue for all kinds of reasons if they think their little one has been harmed in some way. Keep your agency covered above and beyond the normal limits of other policies by opting for commercial umbrella insurance.
Few accidents and unfortunate episodes will escape umbrella coverage, which can only be acquired atop other existing policies that are already purchased at the maximum available coverage.
In addition to the policies outlined above, there are a few other types of coverage your nanny referral business may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.
Home-Based Business Insurance
If your business operates from home, and particularly if it acts as an office for client consultation, a home-based business policy may be something your agency needs. Home insurance is always a good idea, but if damages or accidents occur in your home in a way that is related directly to your business, you may find that your home policy isn’t enough. Keep your home and business fully protected with a home-based insurance policy to cover work incidents that transpire at home.
Workers' Compensation Insurance
If your agency hires workers for part-time or full-time work, you'll be legally required to provide a workers’ compensation policy. This is an essential provision for employees, who deserve safety and coverage for the work that they do in your business. Accidents resulting in injury to an employee on the job will be covered by this policy, providing disability and death benefits for the worker and their family.
Although it’s easy (and essential) to invest in business insurance, it should not be your frontline defense. Yes, insurance will compensate for your business’ financial losses after an incident occurs, but it’s much better to avoid losses altogether.
With this in mind, here are three things you can do to better protect your business:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up a limited liability company (LLC) to protect your personal assets. (Refer to our guide for step-by-step instructions on how to form an LLC in your state.)
- Streamline your business’ internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.
What is included in a business owner’s policy?
A typical business owner’s policy includes general liability, business interruption, and property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.
What is the difference between business insurance and general liability insurance?
“Business insurance” is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.
Do I need insurance before I start a business?
You should invest in coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it’s best to be proactive when it comes to protecting your assets. After all, you can’t buy insurance to cover a loss that has already occurred.
Will insurance protect my business from everything?
Not necessarily. Certain exceptions may be written directly into your policy, and some perils may be entirely uninsurable. Be sure to discuss the scope of your policy in-depth with your agent to avoid being blindsided by holes in your coverage.